Scoring is Credit scoring

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Probably, today there is no such person who has not used a loan at least once in his life. Sometimes bank employees can make a decision on issuing a loan within 15-20 minutes after your application.

How do they do it, how can they appreciate the borrower in such a short time? They do not do it themselves - the decision is made by an impartial computer program - a scoring system. It is she who, based on the entered data, evaluates the level of reliability of the client.

What a strange word

This not too clear name comes from the English word score, which means "account". Scoring is a computer program that is a kind of questionnaire that characterizes the borrower. Before making a decision on issuing a loan, a bank employee will ask you to answer some questions, and enter the answers into a computer, after which the program will evaluate the results, assigning a certain number of points for each item. As a result of adding all the estimatesa certain general indicator, defined as a scoring score, will be obtained. The higher this score, the greater the likelihood of a positive decision to grant a loan. Most often, not one, but several types of scoring are used at once, evaluating the client in different directions, or a complex multi-level system is used.

Types of evaluation

The most important and most common of these is Application scoring, a verification method that evaluates the client's ability to pay. If you did not receive enough points for this type of assessment, then it will be very difficult to get a loan. Alternatively, you may be offered other loan terms - a higher interest rate or a smaller loan amount.

The next step in the assessment is to determine if a potential borrower is prone to fraud. It is evaluated by Fraud-scoring system. The criteria used to calculate this parameter are trade secrets of each bank.

Behavioral scoring is a type of verification that allows you to predict the client's ability to pay in the future. Also, this analysis system allows you to identify some "behavioral" factors: how the client will manage the loan, whether he will make payments accurately and on time, will he choose a credit card limit immediately or will he use the money in installments, and much more.

There is one more, the most unpleasant type of verification - Collection-scoring of the borrower, which is very important for developing measures to work with clients with overdue debts. It is needed to adequately assess the risk of loan defaultand timely application of preventive measures.

Is it possible to "cheat"?

Since credit scoring is performed by a machine, it may seem that it is not difficult to deceive the system - it is enough just to give the “correct” answers from the bank's point of view. However, this is not the case, such an attempt can be successful only in cases where the program is built in such a way that it will not be possible to immediately check some data about you. If scoring requires entering only documented information, then it is almost impossible to deceive the system.

Checking the compliance of the data in the questionnaire with the real state of affairs will not be difficult for security officers, because the overwhelming majority of them are former employees of the Ministry of Internal Affairs, the FSB and other similar departments and willingly use "old connections". In addition, sometimes it is enough just to make a call to work or neighbors of a future client.

So it's still not worth trying to deceive the program, because it initially contains all known schemes and signs of fraud, and if such an attempt is detected, then a loan in this bank will never be given to you.

So, let's look at what advantages a potential borrower should have if he wants to take a loan without problems.

Personal data - who's lucky

1. Gender - It is believed that women are more responsible in fulfilling their financial obligations.
2. Age - here excessive youth or maturity can play a trick on you. The preferred age is 25-45 years. Customers falling within this range may qualify for additional points on this item.
3. Education - if you have a college degree, the bank will trust you more. Such clients are considered more successful, responsible and financially stable.
4. Family ties - single people are not a priority, so if you can "show off" at least a common-law marriage, get an extra point.
5. Dependents - of course, having children will not be an obstacle to obtaining a loan, however, the more of them, the lower the score on this item you will receive.

Financial sector - what professions are preferred

In this part of the questionnaire, the program will evaluate your success in the labor field - general and work experience, the prestige of the profession, the level of wages recently, the availability of additional sources of income and more. The ideal option in this case is to have only one entry in the work book - the more often you changed jobs, the less you stayed at each enterprise, the less points the system will give you.

Oddly enough, banks do not like directors of companies, financial managers, as well as citizens who provide their employment on their own (notaries, lawyers, private detectives, individual entrepreneurs, etc.), since their income is not fixed but directly depends on market trends. Preference is given to clients who are employed, -civil servants, professionals, workers, and middle managers - their income is considered more stable.

Balance of solvency

Scoring-assessment of the ratio of expenses and income, the presence of outstanding loans taken earlier is also carried out. So do not artificially inflate your income, especially if the amount of credit you want to get is very small. Agree, a person who claims a monthly income of 100 thousand rubles, who applies for a loan of 10-15 thousand, looks rather suspicious.

What else the scoring program would like to know

Of course, the list of questions evaluated by the system can vary quite a lot in different banks, but for sure in each of them you will be asked about additional sources of loan collateral. Bank employees will be interested in whether you have additional sources of financial resources, whether you are the owner of a dacha, garage, land, car (if so, which one). Also, the bank will definitely ask why you need money, whether you applied for a loan earlier, how well you fulfilled your obligations to organizations that previously issued you a loan. Points are also awarded for each of these criteria.

Selection Criteria

1. Face control. Although scoring is an automatic computer program, the data is still entered by a person, so even in this case it will not be possible to completely eliminate the “human factor”. Therefore, when going for an interview, trydress smarter.
2. Purpose of lending. If you are applying for a loan as an individual, then an ideal reason for this could be repairs, the purchase of a summer cottage, recreation, the purchase of real estate or a car. If you tell the bank employees that you are taking money to open a business, then most likely you will be refused - the criteria for evaluating legal entities are completely different.
3. Credit history. Of course, most often the scoring program does not have direct access to your history, but it can check for the presence of data about you in the "black list" compiled by bank employees based on previous requests made to the credit bureaus.

When will they not give a loan yet

If over the past 30 days you have tried to take out a loan three times and were refused, then you should not try to do it again. Most likely, you will be rejected again. The fact is that such a scheme is embedded in the program database. Therefore, do not suffer, just wait a month and a half, and your chances of passing credit scoring will increase many times over.

Another important factor is the client's credit load. The program will calculate the total number of your loan payments and decide whether you "pull" another one.

It happens that banks organize a whole scoring network, so you should not submit several applications for a loan at once. If their number exceeds 3-4, then, most likely, you will receive a refusal from all banks at once.

Pros and cons of autocheck

Despite the fact that the scoringthe program is quite high-tech, yet it has some drawbacks:

• banks use a fairly high scale for settlements, which is simply unattainable in many respects for the average borrower;
• specific client data is not taken into account at all, for example, a Khrushchev in the center of the capital can be regarded as suitable real estate, but a mansion on the river bank somewhere in the Irkutsk region will be designated by the system as a "house in the village";
• small banks that do not have sufficient funding to purchase expensive scoring systems, the check is carried out rather superficially;
• The normal existence of a scoring system requires the presence of related infrastructure (credit bureaus, etc.).

However, some disadvantages cannot cross out the positive aspects of using this type of assessment:

• the system gives the most impartial assessment, the impact of the personal impression of employees is minimized;
• financial institutions using the scoring system offer their clients a better interest rate, as the risk of non-return is minimized;
• scoring allows the bank to reduce the number of staff involved in processing applications;
• decision time reduced to 15-20 minutes;
• in case of making a negative decision, the client will be given a list of factors that influenced the receipt of a low scoring score - this will allow to correct the mistakes made whensubsequent calls.

In conclusion, it should be said that such an assessment system is quite new for Russia. And not every bank uses it. So if you are clearly aware of your shortcomings and decide to get a loan without scoring, then it is quite possible to do this, you just need to find "your" bank.